Micronesia in Review: Issues and Events, 1 July 2007 to 30 June 2008: Republic of Palau

The Contemporary Pacific Volume 21, Number 1, Spring 2009, pp. 136-143

Donald R. Shuster

The major issues for 2007–2008 were the activities of the Republic of Palau (ROP) executive and the National Congress (Olbiil Era Kelulau, or OEK); relations with the United States, Taiwan, and Indonesia; the special prosecutor; fishing; and activities of the rural states.

President Tommy E Remengesau Jr is nearing the end of his eight-year presidency and departing as one of Time magazine's "heroes of the environment" for his Micronesia Challenge initiative. This commitment involves the conservation of 30 percent of a nation's marine environment and 20 percent of its terrestrial resources by the year 2020. All the states of the Federated States of Micronesia (FSM), Palau, the Marshall Islands, Guam, and the Commonwealth of the Northern Mariana Islands have signed on to the [End Page 136] challenge. Remengesau attended the Bali international conference on the environment, and Minister of State Temmy Shmull accepted a $3. 6 million grant from the European Union to fund renewable energy and sustainable alternative energy projects. Remengesau met briefly with US Secretary of Interior Dirk Kempthorne while attending the tenth annual Coral Reef Task Force meeting in Washington DC. At a series of conferences to celebrate Israel's sixtieth birthday (1948–2008), Remengesau called on the assembled leaders to develop alternative renewable energy sources, including wind, solar, and water. The conference moderator, former British Prime Minister Tony Blair, commended Remengesau for his brevity and passion. Israel has assisted Palau with fish farming, medicine, and radiology. Furthermore, in April Taiwan donated a half million dollars to the Micronesia Challenge trust fund and, perhaps inspired by this action, the Netherlands, Germany, Italy, and Spain also agreed to contribute.

President Remengesau presented a $67. 9 million budget to the Olbiil Era Kelulau in July 2007, rather than in April as usual. The budget included a $10. 3 million deficit that the president maintained could be covered by an increase in taxes as recommended by a Tax Task Force. The National Congress balked and Palau did not have an approved budget on 1 October 2007, the beginning of the fiscal year. The disappointed president finally approved a compromise budget of $59. 4 million at the end of November. The National Congress agreed on increases to the hotel room tax and fish export tax, and addressed other tax increases on advice from World Bank and Asian Development Bank experts.

The big event of the year was the official opening of the US-funded, fifty-three-mile, $149 million Compact Road on Independence Day, 1 October. An engineering marvel that tested the resolve of Daewoo Engineering and Construction Corporation by running badly over budget and beyond all timelines, the road is a magnificent achievement of design and construction. The US Army Corps of Engineers will be responsible for clearing future landslides, and some twenty Daewoo workmen will remain in Palau for the one-year road warranty period. Remengesau is also hoping to enhance his legacy with the completion of the $11. 9 million Koror-Airai arterial road rehabilitation project by Japan's Nishimatsu Construction Company. The current urban road system, built in 1980–1981, is well worn.

By executive action, Remengesau created the Oil and Gas Task Force. With representation from most segments of Palauan society, the group, chaired by Senator Santy Asanuma, recognized that it still needed to enlarge its membership, being "duty bound to safeguard and protect the varying interests of all Palauan stakeholders, inclusive of both the national and individual states without prejudice" (TB, 11–17 Jan 2008, 2; emphasis added). The World Bank has provided $223, 300 to finance technical assistance to the task force, including consulting services to develop a hydrocarbon code and model agreement, petroleum operation regulations that respect environmental regulations, and hydrocarbon tax regulations. [End Page 137] This is all taking place without knowing whether or not oil exists in commercially valuable quantities north of Kayangel Atoll, the northern-most island area in Palau.

In light of the terrible consequences of the 2006 bankruptcy of the Pacific Savings Bank, Remengesau signed into law a bill amending the Financial Institutions Act of 2001. The amendment will require an annual external audit of all banks in Palau and more time (five years) to rehabilitate a failed bank. This action supplements passage of the Counterterrorism Act of 2007, the Cash Courier Disclosure Act of 2007, and the Money Laundering and Proceeds of Crime Act of 2001.

Remengesau ended the period under review by delivering his last State of the Republic address, in which he thanked the people of Palau for giving him "the greatest honor of my life" and a "profound experience." He also hosted the Micronesian Leaders Summit in Palau; traveled to the Republic of the Philippines for a state visit with President Gloria Macapagal-Arroyo, during which numerous important agreements were signed; accepted the credentials of Indonesian Ambassador Irzan Tangjung; and led a party of top leaders to the inauguration of Taiwan's President Ma Ying-jeou.

Vice President Elias Camsek Chin declared his candidacy for the presidency, and chose Congressman Alan Seid as his running mate. Unlike previous national elections, a vice presidential running mate is required by a constitutional amendment approved at the 2004 elections. Now Chin's challenge is to balance his campaign activities with his vice-presidential duties. He represented Palau at the United Nations opening session, giving a speech to the General Assembly that emphasized the vulnerability of small island states to climate change. He also stood in for Remengesau at the Pacific Islands Forum. Palau was one of five island nations that did not send their chief executive because of the presence of non-elected Commodore Frank Bainimarama of Fiji. The Chin Seid ticket is one of four teams that will contest the 23 September primary race. The three other teams lined up for the primary are Attorney Johnson Toribiong with Congressman Kerai Mariur; Senator Joshua Koshiba and Peleliu Governor Jackson Ngiraingas; and Senate President Surangel Whipps with the Reverend Billy Kuartei, currently Remengesau's chief of staff.

The nine-member Senate of the Palau National Congress was commended for rejecting the proposed secrecy bill regarding the Compact Review Commission's work product as a clear-cut violation of the Palau Constitution. However, later in the year the sixteen-member House of Delegates came under fire from the press and general public for approving a budget that was heavy on taxes, for not holding public hearings on the budget, and for ignoring serious concerns about the budget and tax increases. Newspaper opinion pieces scolded the legislators with editorial headlines such as, "Who Is Responsible for the Budget Mess?" (TB, 14–20 Sept 2007, 8) and "Irresponsible Leadership and Abuse of Power" (TB, 2–8 Nov 2007, 8). The Tia Belau cartoonist had a field day presenting the congressmen and top executives as greedy pigs feeding on money and power (TB, 2–8 Nov 2007, 8, 15). [End Page 138]

In contrast, the Senate held numerous public hearings and open sessions across Palau on the budget and taxes, and after a continuing resolution that allowed the government to operate at levels from the previous fiscal year for October and November, served up a budget of $59. 4 million, which President Remengesau reluctantly signed into law. The National Congress concluded its work for the period by considering for ratification an agreement between Palau's National Communications Corporation (PNCC) and Taiwan's Chunghwa telecommunications to totally upgrade PNCC equipment and services to make Palau the "e-government, e-health, and e-business center of Micronesia" (TB, 8–14 Feb 2008, 4). The Congress passed the PAN (protected area network) conservation legislation, which calls for a $30 "green fee" to be paid by each arriving visitor beginning 1 October 2008. Most of the fee will go toward protecting Palau's conservation areas. Finally, the Congress passed legislation providing a three-million-dollar subsidy for the Palau electric corporation to cover the surging cost of electricity, with preferential treatment for consumers with low demand and/or low income.

Palau's most sensational financial collapse was the 2006 bankruptcy of the Pacific Savings Bank (PSB). Public Law 7-25 authorized President Remengesau to hire an independent counsel to investigate matters and prosecute individuals. Lewis K Harley of Houston, Texas, was hired, and on 30 May 2008 he filed an interim report with the president and senate. Harley's report makes two basic points. First, the collapse of the bank was caused by "the criminal, improper, illegal, and fraudulent activities of its directors and officers through insider and related party loans, dubious investments, expenses, and other allowances" (TB, 6–12 June 2008, 1, 15). The report states that $41 million was deposited and withdrawn from the bank in just one year, 2005. Second, Harley requires considerably more help to document the entire process of failure. In February, Harley filed charges against Tim Taunton, former president and chairman of the bank's board of directors; Finance Minister Elbuchel Sadang; House of Delegates member Mario Gulibert; other officers of the bank; and members of the Board of Trustees of the Civil Service Pension Plan "in relation to the Pension Plan's placement of $1 million into the defunct bank in September 2006" (TB, 15–21 Feb 2008, 1). The Pension Plan Board is accused of knowingly failing to safeguard and insure the preservation of pension plan funds, thereby "enabling the psb directors and officers to continue to deceive the public with regards to its financial conditions" (TB, 15–21 Feb 2008, 15).

Palau has had friendly diplomatic relations with Taiwan since 1999 and over the years received more than $100 million, mainly for infrastructure, but also for services such as the Taiwan Technical Mission, which provides agricultural research, extension, and products. On two occasions Palau and Taiwan's other Pacific allies (the Marshall Islands, Solomon Islands, Kiribati, Nauru, and Tuvalu) sent letters to the United Nations urging that Taiwan be granted UN membership. The March 2008 bid was the fifteenth [End Page 139] consecutive annual request for recognition for Taiwan.

Taiwan's latest venture in the region is the establishment of the Austronesian Forum for Cooperation. At the inaugural conference in Koror, nine countries signed the forum declaration: Palau, Marshall Islands, Kiribati, Solomon Islands, Tuvalu, Nauru, Philippines, New Zealand, and Taiwan. The forum has the endorsement of the leaders at the second Taiwan– Pacific Allies summit leaders in 2007. Its basic purpose is to bring the Austro nesian communities together to promote democracy, good governance, human rights, and sustainable development. The forum headquarters will be established in Palau.

In March 2008, Palau's popular special prosecutor, Everett Walton, resigned. He was especially active in pursuing congressmen who allegedly violated rules and regulations regarding travel, and misuse of government funds. Walton also filed complaints against state governors and administrative officials for numerous alleged violations of their use of funds and misconduct while in office. In a small society such as Palau, aggressive pursuit of alleged lawbreakers sets up a wide range of dynamics. Remengesau was unsuccessful in persuading Walton to reconsider his resignation, and he departed Palau on 29 March. Tia Belau said it best: "We think Walton did a good job under the circumstances" (TB, 14–20 March 2008, 8).

After some misunderstanding regarding the terms "renegotiate" and "review," Palau and the United States had one meeting to begin the process of reviewing the terms of the Compact of Free Association, which should be completed by 1 October 2009. During the first 15 years of the 50-year compact, Palau received over $500 million from the United States, designed to assist the young nation achieve economic self-sufficiency, among other things. Added to this was about $100 million contributed by Japan and another $100 million from Taiwan since 1994. Even with these sizable monetary injections, it is questionable whether or not the goal has been achieved. This is the basic issue the two review teams need to tackle. How special is the special relationship that exists between Palau and the United States, particularly regarding continued financial support both for operations and infrastructure?

Rev Billy Kuartei and Director of Pacific Island Affairs for the US Department of State Steven McGann sat down at the table in Palau in March to begin the review. Press reports indicate that discussions did not get beyond generalities. Section 432 of the compact states, "Upon the fifteenth and thirtieth and fortieth anniversaries of the effective date of this Compact," the two governments should consider "the overall nature and development of their relationship." Specifically, the parties need to review progress toward the objectives set out in Palau's development plan (Public Law 99-658, Compact of Free Association, Approval, pages 3690–3691, 3699). So, there is a lot of reviewing to do.

Palau's rural states are becoming more active in Palau's affairs. With the exception of Koror, the other fifteen states depend exclusively on the national government for cash support, yet a few states act as though they are [End Page 140] independent entities with their own foreign policies. Peleliu's governor, Jackson Ngiraingas, has been talking with various officials in Malaysia about building large resort projects on Peleliu and Angaur. The Angaur project envisions five gigantic buildings, each with seven towers as a first phase, and a second phase of a golf course and 500-room resort located in another part of Angaur. The revenue from the operation of these facilities would pay off billion-dollar loans taken out by both islands to construct the resort facilities.

Ngchesar, on the other hand, is leasing land for housing and working with the Taiwanese to get their road paved. Also in Ngchesar, a jungle river boat cruise began as an ecotourism operation. These projects could go forward only after Governor Hideo was removed by the State Council for his pro–Mainland China activity.

Aimeliik State elected Leilani Reklai as its governor. She joins Vicky Kanai of Airai State and Akiko Sugiyama as the first female governors of Babeldaob states. The governor of Melekeok was sued by the special prosecutor for multiple charges of misuse of state funds and misconduct in office, but the suit was dropped by Walton just before he departed from Palau. However, the state still has to deal with the suit filed by Patrick Tellei regarding a petition to amend the state constitution, which would reduce the number of legislators to eleven, all elected, as an alternative to the current five elected seats plus the state's ten traditional chiefs and the governor.

The colorful and sensitive Larry W Miller, associate justice for the Palau Supreme Court, tendered his resignation after fourteen years on the bench. Much endeared, Miller learned to speak and even sing in Palauan. He presided over many landmark cases, including the Airai Golf Course case ROP v ASPLA (Airai State Public Lands Authority); the ROP versus Saunders murder case; the Rengiil Estate and Becheserak Estate cases; as well as chiefly title cases such as the Airai Ngiraked and Ubad title disputes. Miller will return to New York and join his brother's firm, which specializes in reorganization and merging of corporations and companies. Miller's replacement on the bench will be Alexandra F Foster, who arrives in September 2008. President Remengesau chose an off-Islander because these individuals have few conflict-of-interest issues when it comes to judicial work.

Fishing is listed as Palau's second largest industry after tourism, yet few Palauans are involved as commercial fishermen. Palau sells its fishing rights to three companies, two of which are in trouble for cigarette smuggling and tax evasion. Palau Marine Industries Corporation recruited former President Kuniwo Nakamura to intervene in their tax evasion case and worked out an arrangement whereby the company would pay about $700,000 to settle it. The company made just one payment of about $100, 000 and even attempted to sell the company in hopes of continued evasion. In late May, Palau Marine Industries lost its case at the appellate level and is officially out of business.

Palau hosted the Forum Fisheries Agency (FFA) fourth ministerial meeting, followed by the sixty-seventh Forum Fisheries Committee meeting in Koror. The tone of the meeting [End Page 141] was set by the ffa director general, Tanielu Su'a, who informed the sixteen member countries that "tuna fisheries in the Pacific have been under 'severe stress' from a [sic] overcapacity, excessive fishing pressure, technological innovations, poor fishing practices, ineffective management, non-sustainable development, and poor monitoring, control and surveillance" (TB, 23–29 May 2008, 3). These circumstances led the Western Pacific Regional Fishery Management Council to recently prohibit purse seiners from fishing within seventy-five miles of shore in US federal waters off Guam, the Northern Marianas, and American Sāmoa. Such drastic action is designed to protect the population of skipjack tuna.

In another important development, President Remengesau expressed interest in a solar-power experiment that would beam electricity generated in space down to a receptor located on Helen's Reef in the Southwest Islands. The electrical energy of one megawatt would be sufficient to power 1,000 homes. This would essentially be a feasibility study to test the practicality and safety of the idea. An American entrepreneur approached Remengesau about the concept at the UN Climate Change Conference in Bali in December 2007 (TB, 28 Dec 2007–3 Jan 2008, 1, 15).

Deaths of people have a signifi cant impact on small societies such as Palau. During the year, Tatingal Ruauch, age 89, passed away. Gabriela Ngirmang, women's leader and voice of the anti-compact movement of the mid-1980s, died at 84. Ngirturong (chief) Masao Franz Remengesau, 87, and chief Johanes Ngirakesau, 86, passed away. At only 54, Director of Public Safety Hazime Telei passed away. Carol Kesolei Anastacio, 54, who had been a teacher at the Palau Community College and a successful businesswoman with her husband, unexpectedly passed away. Ngatpang chief and local historian Techitong Rebluud, 80, died. In the New Year, Rengulbai Brikul Ngiruchelbad, age 84 and a member of Palau Council of Chiefs, died. On 31 January, Ubad Ngeriut Matlab passed away; although a member of the Idid clan of Koror, she held the important title of Ubad of Airai. At the very young age of 19, Madraisau Smus, a star baseball player for Palau, died in a tragic car accident. Kukumai Rudimch, wife of Indalecio Rudimch and mother of the late Senate President Isidoro Rudimch, who helped establish one of Palau's oldest and most successful businesses, died at 81. Iluches Beches, the high chief of Ulimang, Ngaraard, died at 88. Mike Ongalibang, a member of the Ngchesar State Council, passed away at 59. Tragically, Palau artist Willy Watanabe, and Rodel Marco, a graphic artist from the Philippines, died from drowning at the Japan-Palau Friendship Bridge. Willy attempted to save Rodel, but both were lost while at an Easter Sunday picnic. Lance A D Sugiyama, an 18-year-old student at Palau High School, also died from drowning. Ricardo Ngirkelau, 61, passed away; he was a superb baseball player and all-around athlete who loved athletic competition. Businessman and chief Hittora Demei died after being ill for some years. Idip Ngiratiou, who held the title Ngirarois, passed away at age 105. He was the organizer and manager [End Page 142] of Palau's very first baseball team, the All Palau All Stars, which he had started in about 1925, during Japanese times. The former governor of Angaur, Ben Roberto, passed away on June 7. A colorful person, Ben ran for the presidency of Palau in 2000 and was the leader of the Mormons in Palau. Ebas Rsei, the longest-serving member of the Ngchesar State Council who held the chiefly title Rechtuker, died at age 85. Tragically, Kirino Semdiu, a local chief, drowned while collecting trochus outside the reef at Melekeok State; he was 47. Omoto J Rengiil, a retired elementary teacher and principal of Airai Elementary School, also passed away. On Guam, Ichiro Belailes, one of the oldest founding members of the Palauan Community Association, and a retired member of the US Army, died at age 78.

Special thanks to Yoichi K Rengiil for comments on an earlier draft of this review.

TB, Tia Belau (This is Palau) news. Weekly. Koror, Republic of Palau. [End Page 143]

Donald R Shuster, who has written the political review of Palau for this journal every year since 1990, is a professor of education and Micronesian studies and a faculty member at the Micronesian Area Research Center, University of Guam. He has worked and lived in the Pacific since 1965 and focuses his research efforts on Micronesia and the Republic of Palau. Shuster's research-based biography Roman Tmetuchl: A Palauan Visionary (2002) was the first such biography to be written about a Micronesian leader.

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